Healthy momentum

We raised FY18-20E loan growth slightly to ~9-10% from 9-9.5% based on an average multiplier between its loan growth and Singapore’s GDP growth of 2.6x. A rebound in Singapore’s property market can benefit UOB as 50% of its total loan book is related to housing and building and construction (B&C) loan vs 42% for peers.

Scope for higher dividends

With earnings momentum likely to continue, strong fully-loaded CET1 capital at 14.7% and consistent improvement in return on risk-weighted assets in recent quarters, we think there is scope for capital management and higher dividends. We raised our FY18-20E DPS forecast to SGD1.20-1.40/sh (from SGD1/sh). This implies payout ratio of 42-46%.

Maintain BUY

We like UOB’s disciplined pricing strategy and its sensitivity to re-pricing intervals.

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